2020 (3) TMI 950 - AT - Income Tax

Penalty u/s. 271(1) (c) - Defective notice - whether the assessee has concealed its income or furnished any inaccurate particulars of income? - HELD THAT - As decided in case of Jeetmal Choraria 2017 (12) TMI 883 - ITAT, KOLKATA Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. We, therefore, sustain the deletion of penalty by the Ld. CIT(A) on the reason of invalid notice before imposing penalty and, therefore, the appeal of revenue is dismissed.

Summary

Issues Involved:
1. Validity of the notice issued by the AO under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961.
2. Deletion of the penalty by the CIT(A) on the merits of the case.
3. Condonation of delay in filing the cross-objection by the assessee.

Detailed Analysis:

1. Validity of the Notice Issued by the AO:
The primary issue raised by the assessee was the validity of the notice issued by the AO under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961. It was argued that the AO did not specify whether the penalty proceedings were initiated for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal noted that the show cause notice did not strike out the irrelevant portion, thereby failing to specify the exact charge against the assessee. This issue was supported by precedents from the Hon'ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton and Ginning Factory, where it was held that such ambiguity in the notice renders the penalty proceedings invalid. The Tribunal also referred to the Hon'ble Supreme Court's dismissal of the Revenue's SLP against the Karnataka High Court's decision, reinforcing the principle that a defective show cause notice invalidates the penalty proceedings.

2. Deletion of Penalty by CIT(A) on Merits:
The CIT(A) had deleted the penalty on the merits, noting that the omission to show the income was due to an inadvertent and bona fide error, and not due to any contumacious conduct by the assessee. Although the Tribunal did not delve into the merits of the CIT(A)'s order, it upheld the deletion of the penalty on the ground of the invalid notice, thus maintaining the relief granted to the assessee.

3. Condonation of Delay in Filing Cross-Objection:
The cross-objection filed by the assessee was time-barred by 134 days. The Tribunal, after reviewing the condonation petition and hearing the submissions, condoned the delay and admitted the cross-objection. This allowed the Tribunal to address the issues raised in the cross-objection, including the validity of the penalty notice.

Conclusion:
The Tribunal concluded that the penalty proceedings were invalid due to the defective show cause notice issued under Section 274, which did not specify the exact charge against the assessee. Consequently, the appeal of the Revenue was dismissed, and the cross-objection of the assessee was allowed. The Tribunal emphasized the importance of clear and specific charges in penalty notices, aligning with the principles established by higher judicial authorities. The order was pronounced in the open court on 18 March 2020.